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adelzadeh

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If you read the trader interviews in the Market Wizard books, all of these billionaire/multi-millionaire traders emphasize the importance of managing risk. If they had a Holy Grail system, risk management would be largely irrelevant.



Here are three reasons why you’ll have better luck being the first man (or woman) to reach the sun than finding a “holy grail” for forex trading:


1. No one can prepare for ALL market uncertainties.


One of the advantages of trading forex is that the bajillion factors that move currencies make it hard for any individual or group to influence price action for prolonged periods of time. Unfortunately, this also makes it difficult for traders to predict future price action.


Unless you gain a superpower that lets you know what central bankers and economic influencers will say ahead of time; warn you of the next natural disasters and terrorist attack, or prepare for similar circumstances, then you’ll unlikely to find a holy grail anytime soon.


2. Humans move the market


At least for now. Though Robopip and mechanical trading systems in general have gained popularity over the last few years, humans still control the ebbs and flows of the forex market. Human behavior is one of the reasons why we still see trading opportunities, where price doesn’t reflect its value based on available data and existing market themes.


Mike may be interpreting an economic release in a different light and place orders in the opposite direction of Harvey’s. Elliot, who handles a corporate account, may hold on to a losing position rather than close a losing trade. Multiply these everyday scenarios and we get an unpredictable mix of potential price reaction.


3. No strategy is profitable in ALL types of trading conditions


Those who have spent some time with markets know that, like human behavior, there are patterns that tend to repeat themselves on the charts.


EUR/USD could react to stochastic signals and trade on a 100-pip range for days. Likewise, AUD/JPY could be counted on to bounce lower from a 100 SMA retest.


But what if the pattern ends and price transitions into another pattern? For example, EUR/USD could suddenly break from its range and keep stochastic in the overbought area as the pair switches to a trending setting. Stochastic, which had been reliable, is now useless while trending strategies start to make sense again.


Most trading systems only work well until price shifts into another pattern. The continuous shifts in trading conditions and the unpredictable timing of when they occur make it difficult for traditional technical tools to be reliable all day every day. It takes discretion to spot shifts in patterns and to identify which strategies would yield profits.


Just because there’s no holy grail doesn’t mean you can’t be profitable trading forex. Many traders are already trading full-time and even more are content to be consistently profitable. The key is to control your risk. Since you can’t eliminate it, the least you can do is to control it with proper risk management.


veteran trader first focus on risk management,money next come


“You should always be able to find something where you can skew the reward risk relationship so greatly in your favor that you can take a variety of small investments with great reward risk opportunities that should give you minimum draw down pain and maximum upside opportunities.” – Paul Tudor Jones


“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.” – George Soros


“Frankly, I don’t see markets; I see risks, rewards, and money.” – Larry Hite


“It is essential to wait for trades with a good risk / reward ratio. Patience is a virtue for a trader.” – Alexander Elder


“Paul Tudor Jones [had a principle he used to use] called 5:1. […] he knows he’s going to be wrong [sometimes] so if he loses a dollar and has to spend another dollar, spending two to make five, he’s still up $3. He can be wrong four out of five times and still be in great shape.” – Anthony Robbins on Paul Tudor Jones


“The most important thing is money management, money management, money management. Anybody who is successful will tell you the same thing.” – Marty Schwartz
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Traders are constantly searching for the indicator & Expert Advisors that will make them rich, but trader Rob Hoffman warns that indicators & Expert Advisors work differently for every trader and mustn’t be used as a crutch.


Traders always seem to be looking for the next hot indicator & Expert Advisors or the indicator & Expert Advisors that’s going to make them millions of dollars and be able to use that forever and ever on any kind of market, but is that the reality?


Our guest today is Rob Hoffman; he’s here to talk about that. Rob, should I rely or go out and try to find the best indicator to use and continually use that? What’s the best way to deal with so many that are out there?



You know Tim, I went through that for years, looking for the magic bullet, the secret, the “HolyGrail.” While I found a lot of indicators that seemed to work a lot of the time, what I really found in the end is that it’s not just indicators, because even if you have a great indicator, what do you do with that indicator?


When it says buy, do you go ahead and delay your buying decision? Do you go ahead and buy in front of your buying decision, so do you front-run the indicator? How do you start handling it emotionally when the signal is about to fire off or does fire off?


Even if you have a great indicator, what I find often in the real world is what works really well for trader number one doesn’t necessarily work well for trader number two.


A lot of that is personality, personality style, and also kind of their mindset, their emotional state.


What I believe is…I’m a firm believer that the “HolyGrail,” in many ways, is within a trader, their mindset.


I often talk about different mindsets that I believe to be adverse for most traders.
What happens is—and I had recently a real life example of another reason not to go ahead and rely strictly on indicators, but focus on price action, support/resistance, and mindset as well—I recently had a situation where a permissioning server that I was trading through went ahead and went down, so all the indicators that I had that were permissioned on that server all went down, so effectively I had support/resistance levels, price action, and a volume indicator, basically, a volume indication.


So I was back to the basics. No fancy indicators, no custom indicators, no proprietary “Holy Grails,” just Rob Hoffman’s support/resistance and price action. That trade worked out very well for me.


The point is, though, regardless of how it worked out, I had to get back to the basics, and if I was really only focused on indicator trading, I would have been paralyzed. What do I do, my indicators aren’t there, I guess I’m going to have to shut down the computer for the day?


Also, indicators are very well known or giving false signals. Even the best indicators will occasionally give you a false signal.


How do you, or how in tune are you with the market to tell you at a particular time, you know, the indicator says buy or sell, but something just doesn’t seem right here. I’m not feeling it in the price action; something’s off, something’s not right. I think I’m going to abstain from taking this particular trade, so still being in tune with price action, volumes, support/resistance, I think, are really important.


You want to be able to trade whether or not you have access to a specific tool. Because in the end at some point you’re going to have just price to watch and maybe volume and the support and resistance levels, so you don’t want to use it as a crutch, I guess.


Exactly, I’m very firm about that, I don’t want to use it as a crutch. It’s a support decision tool when I have it, but in the end, there’s more than life in this search for the “HolyGrail” or the Holy indicator, that’s right.


Ask any quant on Wall Street (the super geeky math and physics PhDs who create complex algorithmic trading strategies) why there is no “holy grail” indicator, method, or system to pull profits 100% of the time.


You will probably be given two reasons:


1. You can’t predict the future.
Is there any way to know what a central bank head will say during a speech?


Or maybe what a super famous investor or hedge fund manager says during a random TV interview?


Do you know when the next terrorist attack will hit and cause risk aversion?


How about a natural disaster like an earthquake or tsunami?


The list of unforeseen market moving catalysts is infinite and when they happen, they can rock the markets and your forex trading system.


Understand that this is part of trading and the best you can do is be prepared to limit your losses if they occur.


Be ready to have your world rocked. And we don’t mean that in the way you think it means.


2. Data doesn’t move the market. Humans do.
There will be times when data or market themes do not mesh with price action.


Why is that?


Maybe the outcome was priced in ahead of time? Maybe forex traders weren’t focused on the data that was released?


Maybe there was an institution covering a huge position that was on the wrong side of the market?


Would all players in the market react to an unforeseen catalyst the same way?


Whatever the price behavior may be, the decisions that lead a trader to take action aren’t always logical or congruent to the information out there.


When you multiply this by the millions of players with different goals/strategies and different sized trading accounts, it becomes impossible to tell where the overall market will go every single time.


You can’t quantify or calculate human behavior and unknown future events into an elegant mathematical equation to completely get rid of risk.


There will always be some level of uncertainty and there will be times when you will be on the wrong side of a currency market move.


Actually….there will be MANY times when you will be on the wrong side of a currency market move.


Perfectionists should probably stay away.


For those of you who always feel the need to be correct, we must warn you now…


Nobody can perfectly predict the market every single time.


Nobody
.


All hope is not lost though if you decide to stubbornly not listen and continue your search for the Holy Grail.


Rumor has it that if you can find a pink unicorn standing under a rainbow, you will come across an invisible leprechaun who will give you the Holy Grail. Good luck
 

Medusa1

New member
Banned Users
Truth be told, there is no holy grail, else rich pockets will just buy and make millions. We know humans control the market, which is why we traders try hard to predict human reaction toward the market to get the better of them.
 

adelzadeh

Well-known member
YOU WANT BUY A SYSTEM AND FIND HOLLY GRAIL THEN...... BUT:

Personality and Trading Systems
The idea that using a methodology that suits your personality is an essential
component of trading success also helps explain why most people lose money
using trading systems they bought. Why is that true? Is it because most trading
systems don’t work on data not used in their development? I am not implying
that. Actually, I have no idea what percentage of trading systems sold to the
public provide a market edge. But even if I assumed that more than 50 percent of
the systems sold would be profitable if applied as instructed, I would still expect
over 90 percent of the buyers of those systems to lose money trading them.
Why? Because every trading system, regardless of the strategy employed, is
going to hit periods when it does poorly. Now, if you buy a system, by definition,
it has nothing to do with your personality or beliefs. In many, if not most, cases,
you won’t even have any idea what drives the system’s signals. Consequently,
the first time the system hits a bad period, you are not going to have the
confidence to stay with the system, and you will stop trading it. That is why,
invariably, most people who buy systems will end up losing: They will stop
using the system when it goes through a bad period, and they won’t be there
when the system recovers.
 

loftrader

Member
Very good and interesting post. The question from your last post is "What would make a system to stop working during a period of time and start working again after.
 

adelzadeh

Well-known member
Very good and interesting post. The question from your last post is "What would make a system to stop working during a period of time and start working again after.
{{market cycle}} generally system can't identify market cycle

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The Worst of Times, the Best of Times
When Everything Is Going Wrong
Okay, good trading should be effortless. But what do you do when you hit
prolonged periods when trading is a struggle? How do you handle the periods
when almost everything seems to be going wrong and you are in a steadily
deepening drawdown? This question came up in multiple interviews. Even great
traders can experience demoralizing losing periods. The Market Wizards were
quite consistent in the advice they offered about handling difficult losing periods.
They had two basic recommendations:
1. Reduce your trading size. Paul Tudor Jones said, “When I am trading
poorly, I keep reducing my position size. That way, I will be trading my
smallest position size when my trading is worst.”
Ed Seykota, a pioneer in systematic futures trading who achieved
astounding cumulative returns, offered similar advice when I asked him if
he had locked away several million dollars to avoid the Jesse Livermore
experience. (Livermore was a famous speculator of the early twentieth
century who made and lost several fortunes.) Seykota replied that a better
alternative was to “Keep reducing risks during equity drawdowns. That
way you will approach your safe money asymptotically and have a gentle
financial and emotional touchdown.”
Marty Schwartz will cut his trading size to a fifth or even a tenth of
normal if he experiences losses that shake his confidence. “After a
devastating loss,” Schwartz said, “I always play very small and try to get
black ink, black ink. . . . And it works.” Schwartz recalls that after he
took an unusually large $600,000 hit in his account on November 4,
1982, he responded by drastically reducing his trading size, piecing
together many small gains and finishing the month with only a $57,000
loss.
Randy McKay, who parlayed an initial $2,000 trading stake into tens of
millions in profit by the time I interviewed him 20 years later, is even
more extreme in reducing his position size when he is in a losing streak.
“I’ll keep on reducing my trading size as long as I’m losing,” he says.
“I’ve gone from trading as many as 3,000 contracts per trade to as few as
10 when I was cold, and then back again.” He considered this drastic
variation in position size as a key element in his trading success.
2. Stop trading. Sometimes reducing trading size is simply not enough, and
the best remedy to break the downward spiral is to simply stop trading. As
Michael Marcus explained, “I think that, in the end, losing begets losing.
When you start losing, it touches off negative elements in your psychology;
it leads to pessimism. . . . When I have had a bad losing streak, I have been
able to say to myself, ‘You just can’t trade anymore.’”
Richard Dennis, who turned a $400 trading stake into a fortune, estimated
by some to be near $200 million at the time of our interview, had a very
similar perspective, expressing that losses beyond a certain level will
adversely impact the trader’s judgment. His straightforward advice:
“When you are getting beat to death, get your head out of the mixer.”
If you are in a losing streak, the best solution is not trying harder, but
rather the exact opposite: Stop trading.
Take a break or even a vacation,
liquidating all positions or protecting them with stops before you leave. A
physical break can serve to interrupt the downward spiral and loss of
confidence that can develop during losing periods. Then when you return,
ease back into trading, starting small, and gradually increasing if trading
has again become effortless.
If you are in a losing streak, the best solution is not trying
harder, but rather the exact opposite: Stop trading.
Although traders will know when they are in losing streaks, they may be slow
to realize the dimensions of the problem until the loss has far exceeded
acceptable levels. They allow losses to mount without changing anything and
then suddenly are shocked to realize the magnitude of their drawdown. One way
to become cognizant of these persistent losing periods more quickly and in time
to take corrective action before excessive damage is done is to plot your equity
daily. Marcus offered this advice, noting, “If the trend in your equity is down,
that is a sign to cut back and reevaluate.”
When Everything Is Great
The flip side of persistent losing periods are times when things are going almost
unbelievably well. Oddly enough, these are also times to consider playing
smaller. After a particularly strong period of profits, Marty Schwartz will also
reduce trading size, just as he does after particularly bad losses, because he
notes, “My biggest losses have always followed my largest profits.”
I am sure many traders have had a similar experience. The worst drawdowns
often follow periods when everything seems to be working perfectly. Why is
there a tendency for the worst losses to follow the best performance? One
possible explanation is that winning streaks lead to complacency, and
complacency leads to sloppy trading. In these strongly winning periods, the
trader is least likely to consider what might go wrong, especially worst-case
scenarios. An additional explanation is that periods of excellent performance are
also likely to be times of particularly high exposure. The moral is: If your
portfolio is sailing to new highs almost daily and virtually all your trades are
working, watch out! These are the times to guard against complacency and to be
extra cautious
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imi2

Member
The only holy grail is learning how to make money through trading. There are many thing which anyone can go through in order to become successful trader, these things are demo account practicing learning from others etc.
 

faisacan

New member
But even with all of what have been said here folks still make it in the market, and am sure that is why we are still here trying our best to profit. Though we cannot fully understand the market and the future, but we can predict it and that's all that matters.
 

amrirudi

Member
The holy grail is a system or strategy with clear rules that works well enough to ensure effortless trading which is profitable overall.
 

Beloved

Member
There is no computer software, no trading system or method that can be taught in 10 minutes that makes unlimited profits everyday. You need to somehow someway get into the small minority of winners. You need to win the race.
 

faisacan

New member
The holy grail is a system or strategy with clear rules that works well enough to ensure effortless trading which is profitable overall.
There is no such system in the market, things can't always work out the way you plan it. There will always be times when it won't just go your as a trader.
 

Beloved

Member
It is a highly risky business just like shares futures and options. Transaction lots are quite big. Traders may lose capital in no time.
 

adelzadeh

Well-known member
“The markets are the same now as they were five to ten years ago because they keep changing – just like they did then.” – Ed Seykota

New traders make the mistake of looking for the perfect trading system with the perfect entries and exits that work every time. Unfortunately, there is no such thing. If there was a 100% winning system, someone would own the world pretty quickly through compounding.

Profitable trading is all about finding an edge and capitalizing on it. No trading system wins all the time because the market changes constantly. The same signals are not profitable in bull markets, bear markets, and range bound markets regardless of how great the signals are. Moving averages can work in trends, overbought/oversold oscillators can work in trading ranges, and MACD can work in markets that have wide price swings. No trading signal is profitable in every market environment, and no technical indicator is valuable in all types of markets.

Market price action is like a river that is constantly flowing and changing. You can’t trade the same market the same way every time and expect the same results. There is no Holy Grail in trading because it’s never the same price action, and you aren’t the same trader you were yesterday.
 

adelzadeh

Well-known member
5 Reasons Why Price Action Won’t Save You

The problem is, we have to remember that understanding price action trading will not fix all issues. It may not fix any issues.

There are a few cogs to the trading wheel and your level of success in trading is limited to the extent you fully understand:

  1. Risk management
  2. Trading psychology
  3. Trading method
One of the biggest problems facing traders is self-created – it’s the tendency to focus efforts on a sole area of expertise within trading. This could be any one of the three cogs just mentioned.

But whilst mastering one of these is likely to be very useful, each one on its own is just one of the cogs in the trading machine.

In the same way price action ISN’T the Holy Grail and won’t fix every issue a trader will have.

In a narrow market, when prices are not getting anywhere to speak of but move within a narrow range, there is no sense in trying to anticipate what the next big movement is going to be. The thing to do is to watch the market, read the tape to determine the limits of the get nowhere prices, and make up your mind that you will not take an interest until the prices breaks through the limit in either direction. Jesse Livermore



Why Price Action Won’t Always Help Your Trading
Let’s look at the 5 reasons that will help you see that while price action is important, it won’t fix every trading problem you have.

1. What’s The Trading Holy Grail Anyway?
The trading Holy Grail if it existed, would be a system, strategy or method that always produces results no matter what.

  • It’d be easy to interpret.
  • It’d be easy to implement.
  • It’d be easy to make money with.
  • It’d work effectively across all types of markets and all types of market conditions.
  • It’d be great for small and large accounts alike.
Now of course, there are things that might be viewed by some as coming close, but I can’t say that I’ve come across something which meets all the above criteria and is foolproof. If you presented a group of people with a great strategy and all that they needed to be successful, most of them would still struggle to make it work without any guidance.

The trading Holy Grail doesn’t exist.

The Turtle Traders were all taught the same method and all had different results. If the trading strategy was all that it took for success, those results would have been almost identical across the board.



2. Happens All The Time
is happening all the time and the thing is, it’s happening in all places too – not just the places that might be relevant to you. So if you focus solely on price action, you’ll end up taking in a great deal of what some call noise. This can lead you to taking less than optimal trades at less than optimal prices and times.

Can you see the difference between watching price action at a major support or resistance level as opposed to in the middle of consolidation? What about at the end of an abcd pattern or at a pivot point as opposed to a candlestick in a trend?

On its own, price action can convince you of your feelings about direction, but it’s just not enough for consistently profitable trading. And just like any other form of technical analysis, it doesn’t tell you what will happen, just what might happen.

Having an idea of what might happen in a market and then reacting to the event in accordance with a tested trading plan – is the basis for some great trading.



3. It Can Make You Short-Sighted
Aligning yourself with a higher time frame participant is always beneficial. It’s something which traders strive to do even to the extent where people develop specialized approaches for “detecting” them.

Higher time frame participants are generally much larger and tend to initiate directional movement in the markets – get on the right side of this and clearly there’s going to be the opportunity to make some money.

The problem with price action is that it has the potential to draw you in to a smaller and smaller time frame. This is an approach that traders will take to get a more intricate look at what is happening on a chart. The question you may want to ask yourself is if it really adds to the trading outcome in a positive way.

But whichever time frame you’re viewing the market in, it’s very difficult to look outside (and over a bigger time frame) of this. This is because price action can change relatively quickly and you won’t want to miss anything.

But if you’re not careful, you’ll miss what the higher time frame participants are doing.



4. Getting Sucked In
Getting sucked into the market when there’s no real reason to trade is one of the biggest plights of the day trader and price action can easily do this to you if you’re dependent on it alone.

Seeing markets that are moving quickly and maybe look like they’re about to present a great opportunity, even if you’re following price action rules, can get you to take some pretty dangerous trades.

Think of when there’s higher volatility than normal:

  • Can you justify the increased size of stop you need to let a trade play out?
  • Do you have the ability to balance the added risk by reducing size?
  • Are you actually doing this?
It’s vital that the overall context and all the cogs of the trading wheel are part of your trading approach. I bet you never thought of a larger than normal stop in times of greater volatility and how that will affect:

  • Whether you take the trade in accordance with your trading system
  • Your decision making process as you see the large move that you are missing out on
  • The level of exposure that your trading account can take especially if you go into draw down
5. Doesn’t Help You With Trade Execution And Management
Whatever the price action is telling you is more likely to happen, it doesn’t necessarily help a trader to manage a position effectively.

Money management can be supported by price action changing the unfolding picture, but the fact is that a big part of adjusting a position’s target and stop orders, rightly or wrongly, comes down to how far price moves relative to the position itself.

Think about the case of a trailing stop as an example. The stop can be hit without price action dictating that a change has even occurred.

Moreover, what price action doesn’t do (and perhaps for some, will do the opposite) is help a trader remain calm and follow their .Sticking to your game plan can be the difference between making a success of trading and not.



Price Action Still Has Merit
All of this said, although price action isn’t the Holy Grail, price action IS a very important piece of the puzzle if you’re using it as part of a holistic approach. Understanding it with context and an understanding of what markets tend to react to in terms of price, can give you a much better idea of the relative short-term direction a market is likely to move in.

Even with this, you still need to have a solid plan, a good strategy, trade management techniques, manage your emotions – fulfill every cog in that trading wheel.
 
Markets have gone really really far...if you still think risk management is a must in forex in order to make money than you should immediately stop trading and get an education!!!!
 

Zack King

Member
There is no such system in the market, things can't always work out the way you plan it. There will always be times when it won't just go your as a trader.

really interesting thread, many interesting points made but i am in the mindset that there is no set system within the forex industry. markets cannot be fixed, they can be moved and maybe powerful entities can cause movement, but not a system whereby markets are fixed in the sense they repeat on a pattern
 
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